Explore this guide
A business line of credit gives your company access to an approved credit limit that you can draw from as needed. As principal is repaid, available credit can replenish, subject to the lender’s terms and continued eligibility. You do not have to borrow the entire approved amount at once. [2]
Business Line of Credit Requirements
Start with three numbers: monthly revenue, time in business and credit score.
Excel’s business line of credit programs are intended for businesses operating for at least one year, generating at least $20,000 per month and meeting a minimum 600 FICO requirement.
These are starting requirements, not a promise of approval. The provider reviews the full application and decides the amount, pricing and terms.
Look beyond annual sales
Two businesses can each report $600,000 in annual revenue and have very different cash-flow needs. One collects steadily. The other earns most of its money in a short season. Review your recent months individually and explain unusually large deposits.
Know what you already owe
Organize your current financing balances, payment amounts and payment dates. Use that information to check whether a new draw fits alongside the obligations you already have.
What to have ready
To get started, prepare:
- A completed application.
- The last four months of business bank statements, including every page.
- Your business and ownership information, including your tax ID.
- A list of existing financing, including current balances and payments.
For requests over $250,000: also provide a business tax return, a year-to-date profit and loss statement (P&L), and a current balance sheet.
Be ready to explain the amount requested, how you plan to use the funds and where repayment will come from. Identify transfers, financing proceeds and unusual deposits in your statements. Your provider may request additional documents during review.
How Does a Business Line of Credit Work?
A business line of credit uses revolving credit. You request funds up to your available limit, repay according to the agreement and may draw again as credit becomes available. Your limit is not the same as the amount you have borrowed.
Get a limit
The provider reviews the application and establishes your approved limit and account terms.
Request a draw
Request what you need, within available credit and subject to any draw approval requirements.
Repay and reuse
Available credit can replenish as principal is repaid, subject to the account terms and continued eligibility. [2]
See a revolving line in action
Put your own numbers into the line. Watch available credit return as principal is repaid, then see how the rate, fees and payoff date change the cost.
These are editable example assumptions, not an offer or confirmation of a lender’s payoff rules.
A $25,000 draw leaves $75,000 available on a $100,000 line.
Build your example
Interest is calculated on the remaining balance each month.
Draw fee and one-time setup fee
Both upfront fees are nonrefundable in this example. They are not added to principal. Setup is charged once, not again each month.
Principal plus interest. Later payments decline.
- Cash deposited
- $24,500.00
- Net cash after upfront fees
- $24,500.00
- Draw fee
- $500.00
- One-time setup fee
- $0.00
- Full-term interest / monthly fees
- $3,250.00
- Full-term financing cost
- $3,750.00
- Principal + all financing costs
- $28,750.00
- Illustrative annualized cost (APR estimate)
- 28.10%
Financing cost excludes repaid principal. The total includes upfront fees once, even when withheld from the draw.
Choose the repayment schedule for this draw. A revolving account’s advertised term does not automatically establish the term of every withdrawal.
Move the payoff date. See the difference.
You make that month’s regular payment, then clear the remaining balance on the same day.
Select the rule in the actual agreement. No prepayment penalty does not necessarily mean every future financing charge is waived.
Compared with completing all 12 scheduled payments.
- Full-term financing cost
- $3,750.00
- Cost with selected payoff date
- $2,875.00
- Future charges avoided
- $875.00
- Future charges still payable
- $0.00
- Additional payoff charge
- $0.00
- Extra amount to close after that payment
- $12,500.00
- Total cash due in payoff month
- $14,875.00
- Annualized cost with selected payoff
- 29.45%
Principal paid early is not savings. Upfront fees remain in both scenarios. A shorter borrowing period can raise the annualized rate even when total dollars paid fall.
See the payment-by-payment breakdown
| Month | Regular payment | Interest / fee | Principal repaid | Extra to close | Principal remaining |
|---|
Assumptions and how this estimate works
This models one draw, equal month-end payment dates and an unchanged rate. It does not model weekly or daily collections, irregular dates, additional draws, financed fees, recurring account fees, taxes, missed payments or variable-rate changes. The payment term entered is for this draw only.
Remaining-balance interest uses the selected principal or amortizing schedule. Original-draw monthly fees use the original principal each month, with equal principal installments. Charges are rounded to cents each month, with a final principal adjustment.
Early payoff occurs immediately after the selected scheduled payment. Any unwaived remaining scheduled charges and the additional payoff charge are due then. Upfront draw and setup fees are assumed nonrefundable. Enter a quoted payoff adjustment when the agreement imposes a minimum charge or a different rebate calculation.
APR estimates solve the monthly cash-flow rate using the draw less upfront fees, then multiply that rate by 12. They are illustrative annualized costs, not effective annual yields, lender disclosures or a determination of legally required APR. Paying fees separately at the same starting date produces the same net initial cash flow. Ask for the lender’s actual payment and payoff statements.
Available credit assumes cleared payments, no other outstanding draws, no financed fees and no holds. Paying off one draw does not guarantee the account remains open or that another draw will be approved.
The separate calculator uses its own assumptions. Compare either example with your actual agreement before relying on the result.
Each draw can have its own schedule
Some products turn each draw into a separate installment loan. Before taking another draw, request a schedule showing the combined payment amount and due dates. New borrowing may add another payment rather than extend the first one. [3]
A restaurant example
Consider Jen, the owner of a restaurant with a hypothetical $30,000 line. She draws $10,000 for a seasonal menu launch and ingredient purchases. That leaves $20,000 available before any other draws or restrictions.
After repaying the $10,000 principal, she may be able to reuse that availability for a later seasonal purchase. If she then draws $15,000, that is a new borrowing decision with its own costs and repayment requirements. Continued access still depends on the account terms.
Illustrative example adapted from the original guide, not a customer case study. A major renovation may call for a different financing structure.
Business Line of Credit Rates and Fees
Excel’s monthly rates range from 1.5% to 4%, with revolving terms of 6 to 24 months. Look at those figures alongside the complete repayment schedule.
A monthly rate does not tell you the total cost by itself. Confirm how charges are calculated, which fees apply and how repayment changes what you owe.
Ask for the total dollar cost
Before accepting an offer, ask: What will this draw cost if I repay it on the date I expect? Then ask for the scheduled cost if you use the entire repayment period.
A monthly charge based on the original draw and interest on a declining balance are different calculations. Do not treat the monthly percentage as an APR or turn it into a payment estimate without the actual charging method. [3]
| What to compare | The question to ask |
|---|---|
| Calculation method | Does the charge apply to the original draw, the outstanding balance or another basis? |
| Draw and account fees | Is there an origination, draw, annual or maintenance fee? What applies when I have not borrowed? |
| Payment schedule | How much is due, how often and for how long? What changes if I take another draw? |
| Early repayment | Which future charges disappear, and which fees remain payable if I repay sooner? |
Not every product charges every fee. Public lender disclosures show different account and borrowing charges, so review the fee schedule for your specific offer. [1]
Draw Fees, Setup Fees and How They Affect APR
A low advertised rate is only part of the price. Some options charge a one-time setup fee and no draw fee. Others have no setup fee but charge each time you pull money from the line. Compare those costs before deciding which structure fits how you expect to borrow.
A fee on each draw
For the programs discussed here, draw fees generally range from 1% to 3% of each amount drawn. A 2% fee on a $50,000 draw is $1,000. If you later draw another $50,000, that new draw adds another $1,000 fee.
A one-time setup fee
Setup fees generally range from 2.5% to 5% of the amount specified in the offer. Confirm whether that means the approved credit limit, the first draw or another basis. A 3% fee is $3,000 on a $100,000 limit, but $1,500 on a $50,000 first draw.
These ranges describe the options Excel is discussing, not an industry-wide rule or a fee charged by every program. Ask whether a setup charge applies again at renewal or a limit increase, and whether fees are paid separately, withheld from funds or added to the balance.
Compare total dollars drawn, not just the number of withdrawals
With a percentage-only draw fee and no minimum or fixed charge, ten $5,000 draws cost the same in draw fees as one $50,000 draw. The fee is based on the total dollars drawn. Repaying and drawing the same money again can create another fee.
Compare setup fees with draw fees
Change the amounts below to compare two fee structures. This comparison excludes interest and all other charges.
Option A: no setup fee
$1,000.00Total draw fees
- Fee for each draw
- $1,000.00
- Total dollars drawn
- $50,000.00
- Option B: setup fee, no draw fee
- $3,000.00
- Difference in fees
- $2,000.00
The draw-fee option costs $2,000.00 less in fees in this example.
Fee totals are equal at $150,000.00 in cumulative draws, before interest and other charges.
Assumes each equal draw is fully repaid before the next, credit remains available, and the setup fee is charged only once on the selected basis. No renewal, maintenance, minimum or fixed per-draw fees are included. This is a fee comparison, not a prediction of approval, payments or APR.
Why a 2% draw fee does not simply add 2 points to APR
APR is an annualized measure of borrowing cost that depends on the amount and timing of money received and payments made. Upfront borrowing fees can raise that cost even when the monthly rate stays the same. A monthly rate plus a draw-fee percentage is not an APR calculation. [4]
If a $1,000 fee is withheld from a $50,000 draw, the business receives $49,000 but still owes the $50,000 principal plus the agreed financing charges. The same upfront fee can have a larger annualized impact when the money is repaid quickly.
A six-month example with every assumption stated
Assume one $50,000 draw, a 2% monthly interest rate on the declining principal balance, and six equal principal installments paid at the end of successive months. Interest totals $3,500 and scheduled repayments total $53,500 in all three scenarios below. Fees are withheld at funding. There are no other charges or further draws.
| Fee structure | Upfront fee | Cash received | Total financing cost | Illustrative annualized APR |
|---|---|---|---|---|
| No upfront fee | $0 | $50,000 | $3,500 | 24.00% |
| 2% fee on the $50,000 draw | $1,000 | $49,000 | $4,500 | 31.34% |
| 3% setup fee on a $100,000 limit; no draw fee | $3,000 | $47,000 | $6,500 | 46.74% |
Calculated from net cash received and the six monthly cash flows using a monthly internal rate of return multiplied by 12. The setup fee is attributed entirely to this first draw. These figures change with the charging method, fee basis, payment timing and future use. They are not the APR of every revolving line, an effective annual yield or a substitute for the provider’s applicable disclosure. The dollar calculators above do not change this separate fixed example.
The takeaway: a no-setup-fee option may cost less for limited use, while a one-time setup fee with no draw fee may cost less after repeated borrowing. Compare the full cost and repayment terms, not fees in isolation. Paying off early does not necessarily refund a fee already charged.
[4] Method reference: CFPB: annual percentage rate and payment timing and actuarial calculation guidance. These references explain the calculation, not a claim that federal consumer-loan rules apply to every business line of credit.
What the 6 to 24 months means
The range describes the revolving terms. It does not, by itself, establish your payment frequency or the repayment period for every draw. Confirm the account term, each draw’s schedule and renewal conditions before signing.
Open our full Business Line of Credit Calculator →Explore an illustrative payment and cost breakdown. Compare its assumptions with your actual offer, including any additional setup or draw fees.How Much Business Line of Credit Should You Request?
Available limits go up to $1 million. Start with the expense you need to cover, not the largest amount advertised.
Consider a hypothetical contractor preparing for a new project. Materials cost $30,000. Payroll before the first customer payment adds $18,000. The customer has already paid a $12,000 deposit.
| Project cash flow | Amount |
|---|---|
| Materials | $30,000 |
| Payroll before collection | + $18,000 |
| Customer deposit | Less $12,000 |
Illustrative planning example, not an approval amount. Financing costs, collection delays and a reasonable contingency still need to be considered.
Match the draw to the repayment source
Write down what must be paid, when customer money is expected and how much cash the business can contribute without creating another shortage. Then test the proposed payment against an ordinary month and a slower month.
If customers pay on net 30 or longer terms, look at when they actually pay, not just the due date on the invoice. An accounts receivable aging report can help organize that review.
For a larger request
A request near $1 million should come with a clear explanation of the need and current financial information. The advertised ceiling is not a promise that a business meeting the minimums will receive that amount.
What Can You Use a Business Line of Credit For?
A line of credit can help bridge short-term operating expenses and customer receipts. The original reason to consider one still holds: business expenses do not always arrive on the same schedule as revenue. The use must fit the provider’s agreement and your repayment plan.
Seasonal inventory
Purchase stock ahead of a busy period. Base the draw on how quickly inventory is likely to sell and what happens if sales are slower.
Project expenses
Cover materials and supplier deposits before an agreed customer payment arrives. Build the repayment plan around realistic collection timing.
Receivables gaps
Manage eligible operating expenses while customer invoices are outstanding. Have a backup plan for customers who pay late.
Other needs may include repairs or preparing staff for a busy season. Confirm eligible uses and costs first. A line is borrowed money, not a savings account or guaranteed emergency reserve.
For a closer look at operating needs, read our guide to working capital uses.
Business Line of Credit Pros and Cons
| Potential benefit | The trade-off to understand |
|---|---|
| Draw the amount you need | Borrowing costs and possible draw minimums still depend on the agreement. Account fees may apply even when unused. |
| Reuse available credit | Payments must clear, account conditions must be met and future draws may require review. |
| Handle changing expense amounts | Repeated draws can increase combined payments and make the total obligation harder to track. |
| Keep an option for future needs | The provider may reduce, suspend or decline further access under the account terms. |
These are product considerations, not guarantees. Review account fees, draw approval and continued eligibility in the actual offer. [1] [2] [3]
When a line deserves a second look
Be cautious about borrowing to cover the same operating shortage every month without a plan to reduce it. Financing can change when cash is available. It does not, by itself, fix unprofitable pricing or expenses that consistently exceed revenue.
Business Line of Credit vs. Term Loan
A revolving line gives you access through draws. A standard term loan provides a one-time amount with a repayment schedule. Repaying a term loan does not create a new revolving balance. [3]
| Question | Business line of credit | Standard term loan |
|---|---|---|
| How do I receive funds? | Through draws from available credit. | As a one-time disbursement. |
| Can I reuse repaid principal? | Potentially, under the account terms. | Not as a revolving feature. |
| What schedule applies? | The account or individual draw schedule. | The agreed loan schedule. |
| Where should I start comparing? | Recurring expenses with changing timing and amounts. | A planned purchase with a known total cost. |
Neither structure is automatically cheaper. Compare the actual cost, payments and obligations. For an asset you expect to use for years, compare equipment financing and term loans rather than assuming a short-term draw is the right fit.
Secured vs. Unsecured Business Lines of Credit
Secured
Business assets secure the financing. Identify the collateral, lien terms and any personal guarantee obligations before accepting.
Unsecured
No pledged collateral does not necessarily mean no personal guarantee. Wells Fargo’s unsecured BusinessLine, for example, requires guarantees. [1]
Unsecured does not mean risk-free, and it does not mean the debt disappears if the business closes. Ask the provider to identify collateral, UCC filing and personal guarantee provisions. When an obligation is unclear, have a qualified attorney review it before you commit.
Do not confuse the product label with the agreement
If the offer presented is a one-time loan rather than a revolving line, make sure that distinction is clear. Focus on whether repaid principal becomes available again and what must happen before another draw can be approved.
How Excel Helps You Evaluate Your Options
Tell us what the money needs to do.
Buying inventory for a confirmed order, covering expenses while waiting for receivables and preparing for a busy season are different situations. Even when the requested amount is the same, the repayment plan may not be.
Excel helps arrange financing through lending partners. Our conversation starts with the business, the amount needed, the intended use and existing obligations. The financing provider makes the approval decision and sets the offer terms.
What money will repay this draw, and what happens if it arrives late?
Make your financial picture clear
A bank statement’s total deposits are not automatically the same as customer revenue. Consider this hypothetical month:
| Deposit source | Amount |
|---|---|
| Customer payments | $50,000 |
| Transfer from another business account | $20,000 |
| New financing proceeds | $10,000 |
| Total deposits | $80,000 |
In this example, customer receipts are $50,000. Treating the transfer and financing advance as sales would overstate them. Explain those items when preparing the application.
Look past the approval amount
Review the amount you expect to draw, the total cost, scheduled payments and conditions for future access. Ask whether another draw needs approval and what happens if revenue changes. A clear understanding of the obligation matters more than a large number at the top of an offer.
How to Apply for a Business Line of Credit
1. Tell us about the business
Share your operating history, monthly revenue, credit profile and funding need. Explain when you need the money and how you expect to repay it.
2. Provide the requested information
Submit complete documents for the requested periods. Check that ownership and business information are consistent, and explain unusual deposits or changes in revenue.
3. Review the offer before accepting
Compare the amount, cost, repayment schedule and security obligations. Confirm how you request funds and the conditions for additional draws.
Approval, accepting an agreement and receiving funds are separate steps. Timing depends on verification, the provider and bank processing.
Business Line of Credit FAQs
What are Excel’s starting requirements?
At least one year in business, at least $20,000 in monthly revenue and a minimum 600 FICO score. Meeting those starting requirements does not guarantee approval or a particular limit.
Can a startup qualify for these programs?
These programs are intended for established businesses with at least one year of operating history. They are not presented as financing for a pre-revenue startup.
Will I receive the full $1 million limit?
Not necessarily. $1 million is the maximum advertised limit, not the amount every applicant receives. The financing provider decides the approved amount after reviewing the application.
Do I pay anything when I am not using the line?
Check the fee schedule. Some products charge account-level fees even when no money is borrowed. The answer for your offer depends on its actual terms. [1]
Will applying affect my personal credit?
Ask which credit inquiry is used and at what stage. The initial application and acceptance of an offer may be treated differently. Do not assume a no-impact credit check without confirming the specific program. [2]
Can I repay a draw early?
Review the early-payoff terms before accepting. Ask which future charges would be avoided and which fees remain payable. Do not assume early repayment eliminates every charge. [3]
Can the provider reduce or suspend the line?
Depending on the agreement, continued access can be subject to review and changes in eligibility. Ask about renewal, review and suspension terms before relying on future draws. [3]
Does an LLC remove the need for a personal guarantee?
No. Review the guarantee requirement separately from the business’s legal structure. An unsecured product can still require a personal guarantee. [1]
Find a line of credit that fits the way your business gets paid.
Tell us what you need to cover and when you expect the money back. We will help you work through the available options and the questions worth asking before you borrow.
See My Business Line of Credit OptionsAvailable options and terms depend on the financing provider’s review of your business.
Sources and program information
Excel’s program figures were supplied by Nathan Abadi and approved for this page. The disclosures below support explanations of revolving access, fees and guarantees. They do not establish Excel’s program terms or imply lending partnerships.